Correlation Between Liberty Broadband and BASF SE

Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and BASF SE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Liberty Broadband and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty Broadband and BASF SE, you can compare the effects of market volatilities on Liberty Broadband and BASF SE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Liberty Broadband with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and BASF SE.

Diversification Opportunities for Liberty Broadband and BASF SE

-0.6

Correlation Coefficient

Liberty Broadband  BASF SE

Excellent diversification

The 3 months correlation between Liberty and BASF is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Liberty Broadband is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Liberty Broadband are associated (or correlated) with BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and BASF SE go up and down completely randomly.

Pair Corralation between Liberty Broadband and BASF SE

Assuming the 90 days horizon Liberty Broadband is expected to under-perform the BASF SE. In addition to that, Liberty Broadband is 1.07 times more volatile than BASF SE. It trades about -0.25 of its total potential returns per unit of risk. BASF SE is currently generating about 0.01 per unit of volatility. If you would invest  1,050  in BASF SE on September 24, 2024 and sell it today you would earn a total of  0.00  from holding BASF SE or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Liberty Broadband  vs.  BASF SE

Liberty Broadband

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liberty Broadband may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BASF SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BASF SE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liberty Broadband and BASF SE

The main advantage of trading using opposite Liberty Broadband and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband position performs unexpectedly, BASF SE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BASF SE will offset losses from the drop in BASF SE's long position.

The idea behind Liberty Broadband and BASF SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.